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EMC Plays a Deft Hand

Some noncash charges matter more than others. This one is pretty safe.

Storage giant EMC(NYSE: EMC) is living that lesson today. After a spate of recent acquisitions, EMC has decided to organize a couple of them under an international holding company. The idea is to give the new Bus-Tech and Isilon subsidiaries the tools to do sales on a global level, while also establishing their operational independence from EMC itself.

This is all well and good and brings back memories of how virtual computing division VMware(NYSE: VMW) always was allowed to march to its own drum before getting partially spun back out on the open market. But it also comes with a $90 million noncash charge for the reorganization move. As a result, EMC's fourth-quarter guidance moved the generally accepted accounting principles earnings target for fiscal 2010 down from $0.91 per share to $0.87 per share. The GAAP tax rate also moved up from 20% to 24%.

Not to worry -- all Wall Street analysts care about is non-GAAP numbers, none of which are affected at all by this charge. That's why the stock is up on a generally gloomy market day today.

Accounting shenanigans aside, EMC is clearly working hard to make the most of its acquisitions, some of which came through hard-nosed competition with rival NetApp(Nasdaq: NTAP). Growth by acquisition is a time-tested strategy that has made Oracle(Nasdaq: ORCL) and Hewlett-Packard(NYSE: HPQ) into the multifaceted giants they are today, so EMC is treading in well-worn footsteps.